A note from Goldman Sachs on the European chemical sector from mid-week.
Some points:
- We... now expect a protracted period (>2 years) of lower production for European chemicals on the back of the region's energy crisis.
- We see up to 40% of Europe's chemical industry (petrochemicals and basic inorganics) at risk of permanent rationalisation unless a sufficient economic assistance package is introduced, or natural gas prices fall to/below c.f70/MWh.
- If chemical assets in Europe are forced to close, we would expect a sharp rise in import requirements to meet an inelastic global supply base and drive inflation over the mid-term.
But the implications of the energy crisis are much wider than one sector.
- Including all materials-based industries currently curtailing output due to high energy prices (chemicals, glass, paper, steel, ceramics, cement etc) and the downstream "value add': we find €1.6tn sales, 5.1% European workforce (c.11mn jobs) and 7.9% of European IP exposed to deindustrialisation risks.
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This is ugly stuff.
